Increased food prices in Statia, Saba not due to high margins

Consumer prices in St. Eustatius and Saba increased by respec­tively 17 and 25 per cent since they became Dutch public entities almost seven years ago, but it is a myth that this rise was caused by factors such as transporta­tion and electricity cost, the tax burden and the super­market margins.

This was stated in an elab­orate report of the research bureau Ecorys in coopera­tion with the Curacao advi­sory bureau Curconsult ti­tled “Research of prices of food products in the Carib­bean Netherlands,” which Dutch caretaker Minister of Economic Affairs Henk Kamp sent to the Second Chamber of the Dutch Par­liament last week.

The researchers presented a number of recommenda­tions that may apply to St. Eustatius and Saba: intro­duce or expand the volun­tary system of maximum prices, clarify and publicise the different supermarkets’ prices and expand the num­ber of tax exemptions on a number of basic necessi­ties, including chicken and diapers.

Furthermore, the govern­ments should keep investing in local agriculture, look at the possibilities of using the purchasing power of the St. Eustatius and Saba Govern­ments to achieve lower pric­es, and increase consumer awareness through budget planning.

The Dutch Government supports these recommen­dations and will pass on them together with the Is­land Governments, except for the recommendation to arrange joint purchasing of the supermarkets together ; with the local governments. “Purchasing by the super­markets is their own re­sponsibility. Joint purchas­ing by or with the govern­ment is not realistic. This is not a task of government,” Minister Kamp stated.

The research focused on the price development of 17 basic food commodities and a few basic non-food items. The items were: flour, white bread, biscuits, white rice, jeans pants, or­anges, tomatoes, chicken wings and drumsticks, toi­let paper, milk with a long shelf life, cheese, soap, corned beef, orange juice, bottled water, diapers and toothpaste. The list was compiled based on infor­mation about items that people purchase most, Central Bureau for Statis­tics (CBS) data and the in­put of the islands.

The research showed that food prices in Saba have in­creased by 25 per cent since 2010 and in St. Eustatius by 17 per cent, with the big­gest price increase taking place in the first few years of the islands’ new constitu­tional status. The prices of the items selected for the research showed a continu­ous increase.

St. Eustatius and Saba barely produce their own food. The majority of the products are imported from the United States and to a lesser extent from Eu­rope, via the wholesalers in St. Maarten, and trans­ported to the islands mostly by Mutty’s Pride. The net profit by the supermarkets is about three per cent.

The factors that are usu­ally mentioned as those that drive up the food prices in St. Eustatius and Saba — transportation cost, electricity cost, tax burden and the margins of the su­permarkets — only make up a relatively limited part of the prices. “That these often-mentioned factors
largely cause higher prices appears to be incorrect, it was stated.

The lion’s share of the prices is determined by the products’ sale value, which makes a quick, substan­tial permanent decrease of food prices unfeasible. Measures to force a re­duction of prices by law are unrealistic because the research has shown that supermarkets do not have exceptionally high margins. Forcing a reduction of the transportation cost does not work either, because this cost is only a small por­tion of the prices that con­sumers pay for their grocer­ies.

What could have a posi­tive effect on prices is the expansion of the voluntary maximum prices agreement between the government and the supermarkets to set a maximum price on a num­ber of basic food products on a voluntary basis. Such an agreement is already in place in Saba, but doesn’t exist in St. Eustatius as yet.

The research showed that the prices differ per super­market. Consumers can be made aware of lower prices through a system whereby the different supermar­kets’ prices are made more transparent and are made known to the public. The Dutch Government togeth­er with the Island Govern­ments will organise period­ic price comparisons.

The Dutch Government will look into expanding the list of tax exemptions, spe­cifically the general consum­er tax ABB, for basic food items. Exempting chicken and diapers from ABB will be considered. Also, the Government will look at ways to increase consumers’ awareness, including pro­viding information on how to spend money for grocer­ies more wisely.

The Dutch Government and the local governments will keep investing in the stimulation of local agricul­ture, the growing of fruits and vegetables on the is­lands. This will reduce dependence on import and create local jobs. Schools will be dedicating more at­tention to local agriculture to make children more aware of the benefits of growing and eating more fresh produce.

Minister Kamp noted that unlike in the Netherlands, supermarkets in the Carib­bean Netherlands cannot make use of (large-)scale benefits. “The governments are aware of the challenges to achieve lower food pric­es and acknowledge the importance of working to­gether on this. The govern­ments will take on the chal­lenge, knowing that this will result in a bigger consumer awareness, lower prices and the eradicating of poverty on the islands,” he said.